Learning how to enter information into their accounting software is very important says Edmonton bookkeeping. Especially since most bookkeepers will only get interim financial statements to an entrepreneur once a month. And they typically need more up-to-date financial statements more often. In order to make the most informed financial decisions possible.
However, there is a lot of information that entrepreneurs need to keep in mind. When they are learning how to enter their own information into their accounting software.
One of the most important things that they can learn early on. Is the difference between a tax payable account and tax expense account. While they both have to do with taxes.
The tax expense account is where their accountant will enter the information about how much taxes they have calculated the business owes for the previous year.
They will make this calculation after doing their corporate year end. Which is why the entrepreneur will find out what they owe the government only after the year-end is done.
They will enter the amount that they owe into this tax expense account. And as an entrepreneur pays the taxes that they owe. The tax expense account will show less and less money in the account. Until an entrepreneur owes the government no more tax.
However, Edmonton bookkeeping says an entrepreneur should continue to enter send tax payments in instalments. So that they will start to pay taxes that they will owe for the current year.
When their accountant does their corporate year-end for the current year. All of the taxes that they have already paid will be subtracted from the taxes that they owe. Being reflected in the tax expense that is entered in their accounting software for the next year.
When business owners ensure that they are paying their taxes in instalments. Whether they are paying off the taxes that they have accrued. Or paying taxes that they will owe in the future.
Both can be accounted for in their accounting software. As long as an entrepreneur is entering the information in correctly.
The tax payable accounts on the other hand. Are for an entrepreneur to indicate what taxes they have paid and in what amount. Since there are several different taxes that entrepreneur must pay. There will be many different tax payable accounts.
One mistake that entrepreneurs need to ensure that they avoid making says Edmonton bookkeeping. Our co mingling tax payments in various accounts.
This can make it very difficult for their accountant to calculate the taxes that they have paid, because they do not know which taxes they paid or and what amount.
And it can make it very difficult to understand how much they will pay for the next year, because they do not how much has already been paid.
Therefore, business owners should be very careful when they are entering taxes. To know what taxes they have paid. And to account for that properly. By entering the information in the correct tax payable accounts.
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There is a steep learning curve to understanding accounting software says Edmonton bookkeeping. But when entrepreneurs can keep their financial information updated. They will have better and more up-to-date financial statements for making informed decisions in their business.
In fact, it is very important that entrepreneurs learn to use these financial statements often. Because they can make the most informed financial decisions possible. When they use information at their disposal.
One mistake that business owners often make says Edmonton bookkeeping. Especially when they are new in business. Is thinking that they are going to be able to make financial decisions. Based on how much money they have in their bank account.
While that might sound like the best thing to do says Edmonton bookkeeping. This is not true. Because while their bank account will show them how much money they have in their business at that moment.
What it will not show them is how much money they have to use, once all of the payments that they scheduled have come out. Both in checks that they have written to their vendors that may not have been cashed. As well as electronic fund transfers that are still pending.
Therefore, learning how to read a financial statement is very important. Because this can help entrepreneurs understand how much money they have in their business. After taking into consideration all of the payments that are pending.
But also, they will be able to see how much they owe their vendors. So subtracting that amount from the amount that they currently have in their business. They will find out how much money they have left to spend. Or if they can make those financial decisions.
The more up-to-date these financial statements are. The better decision an entrepreneur will be able to make. They should review the statements prior to any financial decision. From paying bills, to running payroll and purchasing assets.
If an entrepreneur wants to make a financial decisions such as running payroll. And after looking at their financial statements. Discover that they do not have the money to make that decision.
They can use those financial statements to understand if they need to increase their marketing so that they attract more customers and more transactions. Or if they need to engage in collection calls to collect on the money that their customers already owe them.
And regardless of what decision is made. It will help an entrepreneur inadvertently spending money they do not have. That could cause them to run out of money, which is why 29% of failed entrepreneurs say their business failed.
If entrepreneurs have made any mistakes entering information into their accounting software. These financial statements may not be accurate. Which will cause entrepreneurs to make poor financial decisions. Such as spending more money than they actually have.
The sooner entrepreneurs are able to enter accounting information into their accounting software correctly. And read their financial statements. The better information an entrepreneur will have to help them run their business.